Under changes proposed by the federal government, the capital gains tax discount of 50 per cent will be replaced with an inflation-indexed model and a 30 per cent minimum rate.
That means the maximum marginal tax rate for startup founders, who often have a negligible initial capital base, will double to nearly 47 per cent.
The changes have been put under the spotlight during a two-day senate inquiry, with the government aiming for the measures to pass parliament by the end of June.
While opponents have hit out at the inquiry's limited time, Treasurer Jim Chalmers said attacks over the length of consultation were being put forward by critics of the whole proposal.
"People who oppose the sorts of changes that we are putting forward will always argue that there should be more time, but that's because in lots of instances they don't agree with the policy direction itself," he told reporters in Brisbane on Tuesday.
"These changes are really important. They won't be unanimously supported, but they will make a meaningful difference, and that's why we're acting to address these issues."
Dr Chalmers said capital gains tax issues had already been examined at a separate inquiry earlier in 2026 before the budget was handed down in May.
Business groups and entrepreneurs have warned the reforms will force founders overseas to countries where the capital gains tax is lower or even zero, such as New Zealand or the UAE.
But that was easier said than done, University of Melbourne tax expert Miranda Stewart told the senate inquiry into the changes.
While some people might move in response to tax rates, the empirical evidence suggested most do not, Professor Stewart said.
"So our individual founder, who wants low tax on capital gain, who wants to be taxed differently from workers, they have to go and live in Dubai, live in the US, in order to achieve that," Prof Stewart said on Tuesday.
"We're talking not about mobility of capital here. We're talking about mobility of people. It's a very different question.Â
"I would not choose at the moment to live in Dubai for my own personal risk-profile, but others may, and it may be that tax plays a role.
"If Australian innovative businesses want to establish in New Zealand, because capital gains tax is zero there, all power to them. Why aren't they there already?"
While Prof Stewart supports the tax legislation, which includes curbs to negative gearing on established investment properties, she accepts the transition will generate significant compliance costs.
Tech Council of Australia chief executive Kate Cornick said the measures would still make it harder for firms in the nation to get ahead.
"If you cut the after-tax rewards for founders, employees, and investors, a negative impact quickly compounds," she told the inquiry.
"Investors back away, fewer founders will get the capital they need to grow, or they move overseas to more attractive innovation ecosystems.
"It's a poor outcome for budding entrepreneurs, but it's a poor outcome for Australia, for our productivity, for jobs, and for our ability to build new industries."
The coalition has vowed to fight the changes.
The Greens, who also hold balance of power in the Senate, have yet to commit their support, as they push Labor to scrap the tax concessions for existing investors as well.
A report into the changes is due to be handed down by the inquiry on Friday.
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